Rasgos que definen la posición de poder del imperator a) Rasgos sacrales

The previous sections have described three separate applications of SFC modelling carried out at the University of Surrey in collaboration with York University in Canada. A parallel development, broadly using the same post-Keynesian SFC framework, was carried out at the University of Vienna. The ECOGRO model is a multi-sector macro model in a stock-flow consistent (SFC) demand driven framework. There are a number of differences between the ECOGRO model and the SIGMA and FALSTAFF models developed in Surrey.

In the first place, SIGMA and FALSTAFF are both calibrated at the level of the national economy; ECOGRO is calibrated for the EU as a whole. Secondly, ECOGRO separates out the energy sector from within the firms sector in order to explore the implications of changing the energy mix. Thirdly, ECOGRO explores the impact of including an environmental damage function on the output of the economy. Finally, the financial structure of ECOGRO is somewhat simplified by comparison with SIGMA and FALSTAFF with a slightly less complex balance sheet and fewer specific representations of financial behaviour.33

Figure 10 below summarises the overall structure of the ECOGRO model which consists of a five- sector real economy comprising households, firms, banks, central bank and government and an additional ‘environment’ sector which provides resource inputs and receives environmental emissions. This innovation allows ECOGRO to integrate supply side environmental constraints (Kronenberg 2010; Fontana and Sawyer 2013) to deal with production led emissions in the EU.

The firms sector in ECOGRO is taken as a macro institution that produces both capital and consumption goods demanded within the economy. The production process requires three key inputs – labor, capital and energy. While labor is provided by households and capital stock formation is supported through loans from banks, energy is produced by the sector itself. Total energy supply is determined by total expected output which is given as a mix of non-renewable and renewable energy. This creates a vertical linkage across two producer types within a sector creating a supply- chain that allows for inter-sectoral feed backs through demand and price changes.

As indicated above, the household sector is divided between capitalists (who in ECOGRO are the sole owners of both production sector and banks) and workers (who supply labour to firms and earn wages from them). The household sector as a whole earns income either through firms’ profits or

33 _{The work in this section is described in more detail in a WWWforEurope working paper available online:}

http://www.foreurope.eu/fileadmin/documents/pdf/PolicyPapers/WWWforEurope_Policy_Paper_018. pdf.

44 | P a g e through wages. Household income is used for consumption which in turn generates demand and subsequently production decisions. This in turn determines employment levels of worker

households.

The banking sector in ECOGRO is modeled as simple intermediary between the households and the firm sector. Banks hold household deposits and give out loans to firms. If deposits are insufficient to meet loan demand, the banks can take cash advances from the central bank. Profits earned by the banks are redistributed directly to capitalist households.

The government plays the role of maintaining public investment and supporting unemployed. In order to finance this expenditure, the government raises revenue through taxes on both the firms and the households. If expenditures exceed revenues, the government issues bonds which are purchased by the central bank.34

Figure 10: Overall structure of the ECOGRO model

Central Bank: The central bank functions as the financial arm of the government where it controls money supply and buys and sells government bonds as required. Like the Banks sector, the Central

34 _{This structural simplification is in fact prevented by the Maastricht Treaty which allows central banks}

only to hold bonds purchased on the secondary market. But for the purposes of the scenario exploration in ECOGRO this is not decisive.

45 | P a g e Bank is model as a passive agent which allows for monetary transfers between the private and the public sectors of the economy.

These five sectors interact with each other to form the real side of the ECOGRO economy in a closed demand-driven framework. Table 3 shows the balance sheet of the economy in terms of assets and liabilities and subsequently the net worth of the economy.

Households Production Financial

Govt. ∑ _{Workers Capitalists Firms Energy Banks} Central

Bank Capital stock + K + KX + K Inventories + IN + INX + INV Bank Deposits + Dh + Dk − Db 0 Advances + Ab − A 0 Bills + BCB − B 0 Loans − Lf − LX + L 0 ∑ + Vh + Vk + Vf + VX 0 0 − VG + NV

Table 3: Ecogro Balance Sheet

Households’ net worth is defined in terms of deposits while firms value is determined by capital stock and inventories minus loans. The government sector is assumed to have a negative net worth, while the banking sector and the central bank have a net worth of zero with perfectly balanced assets and liabilities.

To integrate the real economy with physical material flows, a sixth agent, the environment, is added to the model. The environment is modeled as an independent sector that interacts with the

economy through two different channels. First, it provides a non-renewable raw material for energy production. Second, it accumulates Greenhouse Gasses (GHGs) through the production process. This interaction between the real and the environmental sector allows for studying issues of growth, distributions and climate change in a well-integrated single economic framework. For example, higher consumption levels result in a higher use of resources for output production. This in turn increases both demand for labor and energy which can have secondary multiplier impacts on the economy. Without fully understanding how these changes feedback and stabilize across the whole economic system, it is hard to justify the role of economic policy in the long-run. Another advantage of this framework lies in addressing the distributional impact of different polices especially on inter- household income and consumption distributions. While certain policies might not result in a change

46 | P a g e in aggregate demand, they might have a non-trivial impact the worker and capitalist income and consumption distributions.

Five policy scenarios have been evaluated so far in ECOGRO (Naqvi 2015);

 _{LowCons: Reduction in consumption levels to reduce emission levels following the „limits-} to-growth“ hypothesis (Jackson 2009).

 DmgFunc: Damage to capital stock is proportional to the level of emissions and thus requires higher investment levels to maintain production capacity (Nordhaus 2011, Rezai et al 2012, Taylor and Foley 2014). Capital stock depreciation rate is endogenized to the level of emissions.

 _{HiRenew: High share of more expensive renewable energy in the economy to reduce} emissions (Tahvonen and Salo 2001). Renewable energy is assumed to be more capital intensive and more expensive than non-renewable energy. Thus in order to shift to a higher renewable energy sector, significant investment decisions need to be made to allow for a low carbon transition. This experiment looks at the indirect consequences of this transition process.

 _{Carbon taxes (TaxF, TaxH): Firms and households pay carbon taxes which are endogenously} related to the level of emissions (Marron and Toder 2014). A carbon tax is usually proposed as an instrument to curb emissions. The debate is divided on whether it should be on firms (creator of jobs) or households (consumers of output). This experiment looks at the implications of both taxes across the economy. A deviation in the level of emissions from a benchmark level progressively raises taxes on either firms (TaxF) or household (TaxH). An environment tax on firms results in an increase in prices through the markup, resulting in short-run profit gains for the capitalists. As a result a decline in real income of workers is off- set by the increases in demand from the capitalists through short-run profits.35

 Technological innovation; (InnoK, InnoE): On the one hand, technological innovation has resulted in relative decoupling across high income countries (Jackson 2009). On the other hand, innovation implies low production costs, which can result in higher consumption levels. In order to assess the impact of this “rebound effect”, the model looks at two

exogenous technological parameters; technological improvement in capital required per unit of output and energy required per unit of output (Herring and Roy 2007).

35 _{The result of this is an adjustment in demand from workers to capitalists (worsening of income}

inequality) for the BAU level of output. For the household tax, both workers and capitalists face an equal reduction in demand by lowering disposable income. The net result of this is low output which does not affect income inequality

47 | P a g e A number of model output variables are measured against a Business-as-Usual (BAU) benchmark across the seven scenarios defined above. These variables include: real output; unemployment; inequality (ratio of capitalist to worker incomes); and environmental sustainability (greenhouse gas emissions) and compared with a Business-as-Usual (BAU) benchmark scenario. Figures 11-14 show the simulation results for these four key indicators.

The results show that neither the link between output and income distribution, nor the link between output and the environment is predetermined. In particular, while the connection between output and unemployment conforms to the standard formulation of Okun’s law, the income level and the functional income distribution are not as clear-cut. Similar macro level outcomes can be the result of very different underlying structural and distributional changes. Regarding environmental aspects, the absolute decoupling of energy use and emissions from output can be observed in this model in some cases.

48 | P a g e Figure 12: Unemployment in ECOGRO relative to BAU scenario

49 | P a g e Figure 14: Income inequality in ECOGRO relative to BAU scenario

Four policies show different trade-offs between growth, inequality and environment. The de-growth (LowCons) simulation shows that the lower output leads to higher unemployment while at the same time reducing inequality in the functional income distribution.36

Three policies, however, appear to offer triple-win characteristics. Increasing the share of renewable energy (HiRenew) reduces emissions while leaving all other outcome variables virtually unchanged. Finally, innovations in capital (InnoK) or in energy (InnoE) productivity reduce both energy use and emissions, while at the same time raising real incomes and redistributing towards workers.

If emissions feed back into the depreciation of the capital stock as in the damage function experiment (DmgFunc), this has the opposite effect: unemployment falls but the functional income distribution worsens for workers. At the same time, this is the only policy which leads to higher emissions due to increased investment requirements. Environmental taxes on households (TaxH) or firms (TaxF) have mainly distributive effects while leaving output and emissions largely unchanged.

36 _{It should be noted that, in contrast to scenarios in Sections 4-6, no variations in labour productivity}

growth or working hours are explored in this section. Hence the relationship between output and employment is clearly coupled.

50 | P a g e The model presented here can be extended to test for additional climate-related policies while keeping track of the feedback effects. These, for example, can include consumption based emissions through imports, endogenous growth, endogenous technical change, endogenous pro- (austerity) or counter-cyclical (stimulus) government spending. Other key areas include the inclusion of aspects of financialisation that indirectly feedback into the real economy and subsequently impact the

51 | P a g e